Extra time to pay back bail-out loans

The European Union’s 27 finance ministers have agreed to give Ireland and Portugal an extra seven years to pay back loans granted to them as part of their bail-outs.

The move, approved on 12 April, should make it easier for those countries to leave their bail-out programmes and return to normal bond-financing markets in the coming months. Michael Noonan (pictured), Ireland’s finance minister, said that the development would help the Irish people “have their sovereignty restored”.

The agreement was not universally welcomed. Hannes Swoboda, the leader of the Socialists and Democrats group in the European Parliament, said that an extension of seven years was not sufficient “to address the problem of mass unemployment and ever increasing social imbalances”, particularly in the case of Portugal.

He added: “Delaying reimbursements can only be one part of a more comprehensive approach to create growth, jobs, and ensure a continuous reduction of public debt.”

Ireland was forced into a €67.5 billion rescue in November 2010 and will receive its last instalment in November this year. Portugal obtained a deal worth €78bn in May 2011 and will receive its final portion in May next year. Different parts of the loans mature at different times, but the payback extensions, averaging seven years, will help protect countries from fluctuations in the financial markets.

All 27 EU finance ministers had to agree to the move because loans came from both the European Financial Stability Mechanism (EFSM), to which all EU countries contributed, and the eurozone-only European Financial Stability Facility (EFSF).

Portugal’s extension is dependent on it coming up with new savings to meet conditions of the bail-out after its constitutional court ruled this month against previously-agreed measures.